The Mythical “1099″ Employee

Augmenting a workforce with 1099 workers can be an effective way to rapidly adjust to changing business needs. Not only is this flexible work arrangement beneficial to dynamic organizations, it has become an attractive option for a growing number of talented professionals.

The term “1099 worker” originates from the IRS Form 1099-MISC used to report payments to independent contractors. As 1099 workers become more prevalent, many employers and workers have difficulty understanding the qualities that distinguish these independent contractors from employees. It is important to understand that a 1099 worker is a contractor and not an employee.

In some situations, individuals may request to change their status from W-2 employees to 1099 workers in exchange for higher wages or increased flexibility. This transition should only occur with caution and after careful consideration. Changing an employee to a 1099 worker requires more than terminating the employee, canceling benefits, and paying out vacation leave (if applicable). In fact, it is imperative that the worker actually qualify for 1099 status under the guidelines provided by the IRS. Mis-classification can result in substantial tax bills and penalties for the employer as well as the worker.

To determine if a worker qualifies for 1099 status many organizations use the former IRS 20 Factor Test.   While this still provides a strong indication of the appropriate classification, the IRS has since revised the test to include multiple factors within three main categories. These factors are defined in IRS Publication 1779 and are intended to identify the level of behavioral control, financial control, and the type of relationship between the organization and the worker. One of the factors most commonly misunderstood by organizations is the general right of 1099 workers to determine the means and the methods for accomplishing their work.

For the purpose of ensuring compliance with federal tax regulations, organizations and workers may request a free determination of work status by filing IRS Form SS-8. To complete the form, the organization or the worker must provide specific information in the three main categories identifying the level of control and validity of the worker’s independence. For an independent contractor status to exist the IRS does not require that a relationship meet all qualifying factors. When making a determination, the IRS considers and places weight on all circumstances surrounding the relationship.

Once individuals are properly identified as independent contractors, and there is a decision to employ them, the organization should furnish legally binding business contracts that include, but are not limited to, the scope of work, terms of the engagement, fees and invoicing, and a clause for termination.

It should be clear to all parties that 1099 employees do not exist. 1099 workers are independent contractors, not employees, and therefore do not receive unemployment, social security, workers compensation, health insurance or any other benefits or services provided to employees. They also have the ability to direct and control how they perform their work, and they control the financial and business aspects of their job.

Avoid potential litigation, tax bills and penalties by understanding the differences between employees and 1099 workers. Work with your Human Resources professional to ensure proper classification and if any uncertainty exists, consult with an employment attorney or file IRS Form SS-8 for a determination.

Next Level Leadership

Scott Eblin, executive coach and author of The Next Level, What Insiders Know about Executive Success, has done a remarkable job of capturing the characteristics of “Next Level Leadership”.

Not unlike the concepts in Marshall Goldsmith’s book “What Got You Here Won’t Get you There“, Scott’s book addresses the all too common phenomenon of high performers needing to ‘let go of’ the very skills and traits that made them successful.

I’ve believed for some time that our greatest strengths are also our greatest weakness when it comes to driving us forward.  So what worked at one stage of our career will not necessarily carry us to the next level.  In fact, it often works against us.

I’ll use myself as an example. Earlier in my career, I was very effective by driving results.  My strength was quick decision making and the ability to execute.  Whereas this continues to be a strength, it can also be a detractor if I fail to take into consideration the impact of my decisions on others.

I frequently counsel my clients, “It’s not your intent, but the impact of your actions” that you need to be aware of.  If I don’t take into consideration the impact of my actions, it may unravel the benefit of making a quick decision in the interest of execution.

As Scott points out, transitioning to an executive role (and this applies to becoming a better CEO as well), requires knowing which behaviors and beliefs to let go of, as well as which new ones to adapt.

I had my leadership team read “The Next Level” and we identified and discussed what each of us needed to work on to truly master our roles.

I encourage you to check out “The Next Level, What Insiders Know About Executive Success“  and discuss it with your team as well.

Business Books: What have you read lately?

So many great books….so little time.  When people ask me about how I spend my personal time, it was only recently that I began sharing my love for reading.  Outside of loving the time I spend with my family, long gone are the days of cross stitching in front of the TV. In fact, I don’t even watch television any more.  (With one exception and you’ll need to wrestle that from my 16 year old daughter as we look forward to the one show that airs on Sunday nights.)

So I would LOVE to know…what books are you reading now?  Books like Jim Collins’ Good to Great, and  Bradford Smart’s Top Grading, How Leading Companies Win by Hiring, Coaching and Keeping the Best People have been read and leveraged by many of us.

But what books are you reading now?

I am reading two at the moment:  Creating Your Best Life–The Ultimate Life List Guide by Caroline Adams and Dr. Michael and Who’s Got Your Back–The Breakthrough Program to Build Deep, Trusting Relationships That Create Success and Won’t Let You Fail, buy Keith Ferrazzi.

Creating Your Best Life is based on the latest scientific research into happiness and the role of life lists in attaining it. It helps us understand how to set and achieve clear-cut goals while learning how and why this process contributes to greater contentment.   So think of it as The Secret, on steriods.  Real, concrete actions to take regarding meeting our goals and being happier as a result.

I was fortunate to see the author speak recently.  Caroline Adams Miller — a performance coach and motivational speaker, has a phenomenal personal story of how she overcame bulimia.  She is an accomplished goal-achiever!  Her message is truly motivational and inspiring!

Who’s Got Your Back, recommended to me by my Executive Coach Holly Williams, is thus far PHENOMENAL! It claims that the real path to success in your work and ife is through creating an inner circle of “lifeline realtionships” — deep, close relationships with a few key trusted individuals who will offer the encouragement, feedback, and generous mutual support every one of us needs to reach our full potential.

I consider myself very fortunate, as I do feel that my leadership team does indeed “have my back”!   Do you feel you have surrounded yourself by a team that “has your back”?  I encourage you to read Keith Ferrazzi’s book in determining why this is important.

Let me know what you’re reading today. I’d love to hear from you! ~ Kathy